02/05/2014

Now anything that has a plurality of parts but is not just the sum of these, like a heap, but exists as a whole beyond its parts invariably has a cause.

-Aristotle, The Metaphysics

In his review of Gustave de Molinari’s Cours d’économie politique in the Home and Foreign Review 4, Lord Acton gives as good a starting point for the study of economics as I’ve seen elsewhere:

There is… no ground for the pretense that in order to maintain equilibrium between production and demand, we must employ the foresight of an army of administrators and surveyors, whose duty it should be to prescribe what every producer should provide, and consequently how much each consumer should enjoy. Inhabitants of our metropolis see every morning an ample but not excessive provision made for its 3,000,000,000 inhabitants, and this without any previous direction or settled plan; the utmost order and regularity result from the natural law of the supply and demand finding their equilibrium spontaneously; whereas we might look for chaos tenfold more chaotic than that of Balaclava, if the problems were left to the arrangement of administrators or directors of social labour and consumption.

Here, Lord Acton captures which Lionel Robbins didn’t capture in his often repeated definition in An Essay on the Nature and Significance of Economic Science that economics is "the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” In his attempt to conceptualize economics solely from the point of view of the economizing agent, Robbins allowed the emergent properties of society as a whole - those properties which cannot be understood in reference to any one acting agent in particular - to slip through his fingers.

‘Spontaneous order,’ and ‘emergence’ are deservedly frequently used words in economics. The market order which Lord Acton is pointing out above is indeed a spontaneous order which has emerged through the intertwined interactions of millions of human beings; in the words of Adam Ferguson, it is “the result of human action, but not the execution of any human design.” Strict adherence to Robbins’ definition of economics blinds our eyes to those properties of the market order because they are the outcome of not just one agent’s economizing behavior, but an entire society of economizing agents all interacting with one another. To understand the market order’s spontaneous and emergent qualities, we have to move beyond the point of view of one of the components of the system to the point of view of a spectator of the whole system.

Indeed, from the point of view of a single economizing agent, the market order isn’t even really that much of an order. The Oxford American Dictionary’s first definition for ‘Order’ is “the condition in which every part, unit, ect., is in its right place; tidiness (restored some semblance of order).” When we talk about something as an order, we presuppose the ability to perceive the interacting parts of that order, and choreography between those parts which makes that thing a genuine order. The point of view of a single person cannot capture whether every part of an economy is in its right position, and her eyes therefore cannot capture the greater choreography of the market which Lord Acton remarked on when he pointed out how the 3,000,000,000 inhabitants of London were all provided for. The components of the market order all functioned together to meet the demands of that great metropolis from the wheat fields of the Ukraine to the tea plantations of India. Looking at the market order from the point of view of one agent - as much of macroeconomics does with the device of the representative agent and Truman-Story economics - misses that overarching order.

There is a reason why common language tends to refer as the nexus of human economic activity as ‘the economy.’ To truly appreciate the wonder that is the economy, and how human beings have managed to create patterns of cooperation extending across the entire globe, we must go beyond the point of view of just a single component of that order, and to the point of view of a God-like spectator who can behold the entire order as a single functional whole. Robbins’ definition of economics as the study of the relationship between limitless ends and scarce means has no room for that overarching spectator, and therefore has no space for the perception of spontaneous order.

By reducing all valid economic statements to statements about choosing agents, Robbins definition denies any attempt for there to be economic statements about the emergent properties of the market order which transcend the actions of any one agent. Overall, it denies economics the ability to make statements about the functional order transcending the actions of a single agent, and thereby leaving the spontaneous and emergent qualities of the market order beyond the grasp of economics. On the other hand, starting from Lord Acton’s observation above ensures that economists will be focusing on what the market order is all about: A choreography without a choreographer extending across the entire world.